Wondering how rising rates or federal budget could affect home buying and selling plans? I welcome a conversation any time.
a. In Jan-Feb this year buyer’s, and some sellers were holding back, were not able to get into the market because properties were selling over asking by $50K - $100K+ NOW with interest rates hikes it’s going to cost buyer between $50 - $100/month more in mortgage payments for every $250K borrowed so, which is one is worse increase prices or interest rates?
b. For some mortgage holders, the effect of the rate increases will be negligible as they could opt to extend the amortization period when renewing the mortgage. Even though Mortgage interest rates are heading higher, the current Prime Rate at the Big Banks is trending at 3.20%. It was 3.95% when the pandemic started. So still low by comparison.
c. Last year when interest rates were so low it felt like free money, prices went up because everyone jumped on bandwagon which resulted in record sale prices.
d. Every year there is something that cause buyers/sellers not to move forward with home ownership. The rate increase of home ownership will never keep up with savings no matter how long buyers live at home.
Inflation jumped by one whole percentage point — up from 5.7% in February to 6.7% in March. A 31-year high. Some economists feel that inflation is peaking, however after being told last year that the inflation cycle is “transitory”, now it seems many of us are taking a wait and see approach.
Bank of Canada increases overnight rate on June 1st 2022 by 0.50%, taking it to 1.50% now. High inflation continues to be a concern in addition to the Russian invasion of Ukraine, supply chain disruptions and strong Canadian economic activity. Bank feels higher rates and “Quantitative Tightening” are required to meet their objective of getting inflation closer to their 2% target.
Those with variable rate mortgages or lines of credit linked to PRIME will see payments increase at about $70/month for every $250K borrowed. Most Canadian lenders will also increase PRIME from 3.20% to 3.70% in the coming days.
It is too early to call this a tipping point however if home prices could begin to fall if demand softens further and listings begin to accumulate - turning the Vancouver market into a balanced market. On the other hand, low inventory could lead to price increase in some markets and various property types. We've seen this movie before in 2016.
We believe politicians are hoping to guide the market toward a typical annual real estate cycle with price growth in the range of 1 to 3% annually – in line with income growth. Would government intervention in a free market would work? TBD
There is the belief that buyers and sellers moving to improve their lifestyle should not be concerned with market fluctuation especially if buy and sell in same market conditions OR event set to gain if selling in one area and moving to different part of town or province.
I welcome a conversation as so called experts opinions do not have day to day ear to the ground and not wise to rely on wrong advice which could set buyers and sellers back again. Using a professional agent with market knowledge and experience has became more and more important than ever.